South Africa: Companies Profit from Toxic Water

Published by MAC on 2011-05-02
Source: The Africa Report

South Africa: Companies Profit from Toxic Water

By Khadija Sharife in Durban

The Africa Report

April 2011

Acid mine drainage is the greatest threat to South Africa's environment, pouring toxic acids into the ecosystem. Yet the companies responsible now stand to profit from the clean-up.

It is known as 'eGoli' - the City of Gold - named for the mines that have yielded some 45,000 tonnes of the precious metal from porous dolomite over the past 125 years. But the gold rush along the 75 km 'ridge of white waters', or Witwatersrand, around Johannesburg has bequeathed a grim legacy: acid mine drainage (AMD), formed from water that has interacted with iron ore in mine voids, or underground water systems.

It is characterised by extreme acidity and is contaminated with a high concentration of salts, sulphates and heavy metals. Already, 40 million litres of highly corrosive, toxic and radioactive AMD have seeped into the local ecosystem, threatening communities that depend on groundwater and raising important questions about government and corporate negligence.

The adage that Johannesburg's streets were 'lined with gold' has taken on a new and more ominous meaning. The threat from the bright yellowish precipitate produced by AMD when 'fool's gold', or iron pyrite, is exposed to oxygen and water, emanates from various mining areas in the Witwatersrand including the West, Central and East Rand basins. In August 2002, the West Rand basin began decanting acid water from underground mines, spilling into interconnected mining cavities and tunnels and, in some areas, rising above ground.

Described as the single greatest threat to South Africa's water-scarce environment, AMD has reached the Cradle of Humankind world heritage site west of Johannesburg and, without pumping, it could decant along the city's southern boundary in just over a year.

In late February, the department of water affairs (DWA) finally released the results of an expert report to assess the threat posed by AMD, which urged that pumping and treatment of mine water should be implemented in the Western, Central and Eastern basins "as a matter of urgency".

In his budget speech this year, Finance Minister Pravin Gordhan allocated a provisional amount of R225m (US$32.4m) to the DWA, while the overall cost of mitigation measures to prevent AMD breaking through the environmentally critical threshold of 150m below ground is estimated at R1.2bn.

Of this, R441.6m would be required for capital expenditure, R121.5m for annual operating costs and R626m for long-term prevention, according to government estimates. In addition, there is a dispute over the extent to which mining houses should be held accountable for the hidden costs associated with mining, including AMD. But the problem was a long time in the making. "The projection that the West Rand basin would decant was done in 1996," says hydrologist Garfield Krige, a former water technologist for mining company JCI who formed part of the environmental team that did the work. "Apart from having meeting after meeting and discussing the issues around the AMD, nothing in reality has been done since 1996."

According to Krige, this inaction has enabled many of the original mining houses responsible for producing the mine voids to sell or transfer their assets and liabilities to other owners. "This allowed for them to get out of the problem," he said, citing the example of the Grootvlei mine (see box page 62). Specialists interviewed by The Africa Report revealed that decants of the Eastern basin, estimated to release 82m litres per day in three years if pumping ceases, depend on whether water is drained from the Grootvlei mine, due to the interlinked nature of underground mine voids.

According to the government report, recent rainfall in the Eastern basin had boosted the rate of rise to around 0.4m per day (about seven times the rate during drier conditions). "At the prevailing rate, mine water can flood the pump station in as little as 16 days unless the Grootvlei mine seriously increases pumping output."

According to Andre Botha from Agri South Africa (AgriSA), an agricultural trade association in South Africa representing over 70,000 commercial farmers, AMD would not only impact the best agricultural land but also ecotourism. Botha also cited the case of Grootvlei mine, whose chief executive Khulubuse Zuma is a nephew of South Africa's president. (The mine is also known as 'Mandela's mine' for its connection to Zondwa Mandela, a grandson of Nelson Mandela.)

"Contamination is already occurring in the KrugersdorpBoksburg stretch," Botha told The Africa Report. "They stopped pumping the water at the Grootvlei mine, which then seeps through, contaminating the groundwater. This is the same water used by vegetable farmers for irrigation. "In this case, and more broadly, unfortunately, some of the mines are connected directly or indirectly to ANC cadres or even the party itself. This brings us back to the chicken and egg situation as the policing function should be done by the state," he added.

But Mike Muller, a former director general of the Department of Water Affairs and Forestry (1997-2005), disagrees. "While decants of water from old mines will affect water quality in Gauteng, they are only one of many sources of pollution," he said. Muller was more forthright on the subject of mines and environmental liabilities. He cited the example of DRD Gold, saying that DRD's submissions to the Security Exchange Commission in New York "disclosed substantial financial liabilities and warned that environmental issues related to water management were perhaps the single biggest liability facing the company".

DRD recently declared profits of over R100m, chiefly attributed to the company's sale of old mining rights that would include its environmental liabilities. Company spokesman James Duncan from the PR firm Russell and Associates avoided direct questions on AMD, referring instead to a company brief entitled "AMD: The legal, moral and commercial balancing act".

This disclosed that DRD mined 978,000 tonnes in the area, constituting 0.5% of the total number of tonnes mined undergroundand less than 5% during the operating time of the mines in question. When asked whether DRD was aware, prior to acquisition, of the environmental liabilities including that of AMD, the PR firm's Duncan said that he did not understand the question.

"For us, ownership of the rights is not the issue. The issue is how much of the exposed waste the company is accountable for. After careful calculations we arrived at a figure of 1.5%."

Duncan refused to confirm or deny whether DRD had acquired underground mining rights making it liable for water flowing from the mine. "For us, it is not relevant to the issue of acid mine drainage for which the company is accountable," he said. Initially, the government claimed that DRD was responsible for 44% of the treatment cost in the Western basin area, which began decanting in 2002. DRD maintained otherwise. Like Rand Uranium, DRD challenged the government directive on the issue, claiming it had been withdrawn completely in 2009.

According to hydrologist Krige, government directives kept changing the upper limits of the pollutants allowed to flow into the environment "until it was almost not necessary to treat the water in order to comply with the directive", he told The Africa Report. Meanwhile, those charged with investigating the problem may indeed benefit from its solution.

In August 2005, Harmony Gold Mines (Randfontein Estates) and gold/uranium tailings recovery company Mintails formed the Western Utilities Corporation (WUC) to manage the responsibilities of the Western Basin Environmental Corporation (WBEC).WUC is listed on the AIM board of the London Stock Exchange as Watermark Global plc, but according to environmental expert Dr Anthony Turton*, its ownership is "clouded in mystery" as it is a reverse listing.

"As far as can be ascertained," says Turton, "the main owners are the very mines who seek what is known as 'closure certificates'... which will exonerate the owners from all environmental liabilities."Turton says that the WUC deal will also give the mine owners a guaranteed 16% return on their investment, "So, not only will the mines evade the legal requirement of the 'polluter pays' principle ... but they will actually profit from that evasion." WUC and Watermark Global have yet to release an environmental impact report, produced at an estimated cost of R60m, which digitises hundreds of maps and collated research on the decant forecast to occur in the Central basin sometime between 2012 and 2013.

In addition, a DWA document seen by The Africa Report details plans by WUC to offset the costs of possible remediation via a 75 megalitre treatment plant to convert AMD into potable water. This will be sold on to some 11 million consumers via a company called Rand Water.

One expert told The Africa Report that the process - an alkaline-barium-calcium purification process developed by the Council for Scientific and Industrial Research (CSIR) - was the "least cost option", and another stated that it would have produced industrial or grey water as opposed to clean water.

Phase one of the project could have been completed by December 2010 but the inter-ministerial committee co-chaired by former Department of Mineral Resources minister Buyelwa Sonjica, vetoed the 'polluters profit' plan DWA spokesman Sputnik Ratau said he could not offer comment on the WUC proposal but that government would engage with all stakeholders including mining companies on the question of AMD.

"When it comes to the issue of accountability on the part of mines, government will neither exonerate nor attack them. We must remember that this is the legacy of 120 years of mining and it will not be an overnight solution. It is a work in progress," he said. Not all groups are happy with the process used to create the task team or carry out investigations.

Judith Taylor of environmental watchdog NGO Earthlife Africa says "the Department of Mineral Resources does not work with the DWA or Department of Environmental Affairs. There is no coordination or integration. Companies are basically allowed to self-regulate as there is nobody checking up. The task team itself was created very much as a 'behind-closed-doors' affair."

Still others question the costs. "My problem is that there is legislation in South Africa that requires mines to ensure they' rehabilitate water, to prevent or mitigate any contamination," says AgriSA's Andre Botha. "We know that South Africa is a waterscarce land and if we allow for contamination of our groundwater resources, we are heading for serious trouble."

South Africa, one of the world's most water-scarce countries, receives an annual run-off of just 40mm (from a global average of 266mm) and 98.5% of the country's land mass is classified as arid. Water demand is expected to exceed availability by 33% in 2025 while 10 of the country's 19 water management areas are already experiencing water shortages.

Grootvlei Mine - Politics and Environmental Liability

Negotiations between the post-1994 government and the mining houses was initially akin to a tug of war. In the mid-1990s, Randgold and exploration Co. Ltd, the company managing the East Rand Grootvlei Mine, was ordered by then-Minister of water affairs Kader Asmal to cease pumping polluted water into the flooded sensitive Blesbokspruit wetland.

The government then informed Randgold that a desalination plant had to be in place by December 1999. By late 1999, the mine had been acquired by Petra Mining who claimed it would be built by 2002. the mine was later acquired by Pamodzi gold, which described itself as "the only JSE-listed gold mining company in South Africa to be owned and controlled by historically disadvantaged south africans".

However, by 2008, Pamodzi began defaulting. in 2009, BEE (Black Economic Empowerment)  company Aurora Empowerment Systems, chaired by President Jacob Zuma's nephew Khulubuse Zuma with Nelson Mandela's grandson Zondwa as managing director, offered R215m and was selected as the preferred bidder by liquidator Enver Motala.

Although R10m was placed as a deposit, Aurora repeatedly failed to finance the acquisition. By March 2010, payment to employees ceased entirely, reducing the workforce from 2,000 workers to just 100. In June, these maintenance workers went on strike, and within days water began to flood the underground pump station. The maintenance crew returned to work after being offered pay which did not materialise.

Had they failed to do so, the entire mine would have flooded.  A spokesman for the National Union of Mineworkers, Lesiba Seshoka, informed the media that, "We suspect directors Zondwa Mandela and Khulubuse Zuma are receiving preferential treatment because of their political clout."

Other experts who spoke to The Africa Report believe that government was hoping the 'political capital' would see a buy-in from Asian firms. They also claimed government did not want to place assets in final liquidation as the environmental liabilities would pass to the state. In 2010, the company was also investigated for ecological damage for polluting Blesbokspruit and the case passed over to the National Prosecuting Authority.

Recently, an unnamed state-owned Chinese mining entity, suspected to be Shandong Gold Mining Company, has been granted approval for the 65% acquisition of Aurora's Grootvlei and Orkney mines.

The Mail & Guardian named the middleman who negotiated the deal for both parties as Jen-Chi 'Robert' Huang, hosting the Shandong Group via his company Mpisi Trading. Khulubuse Zuma was at one point described as the chairman of Mpisi, with the words: 'His father is the president of South Africa.'